Securities Docket has obtained copies (see links below) of the two reports by ALJ Brenda Murray examining and ruling on the disciplinary recommendations of SEC Inspector General David Kotz in the Bear Stearns and Pequot investigations. As previously discussed here, Judge Murray concluded that the record did not support any disciplinary or performance-based action in either matter.
In the Bear Stearns matter, Murray states that on October 21, 2008, the SEC appointed her to serve as Initiating Official with respect to the IG’s report that SEC Regional Director David Nelson be subject to disciplinary and/or performance-based action for failing to vigorously enforce compliance with securities laws in connection with the W Holding Company, Inc. and Bear Stearns investigation. In a 9-page decision, Murray found, however, that “The IG’s Report of Investigation does not support his conclusions.” She concluded that “the record does not show that Nelson failed to vigorously enforce compliance with the securities laws in connection with the W Holding/Bear Stearns investigation. There is no basis for following the IG’s recommendation as to disciplinary or performance-based action.”
Similarly in the separate Pequot/Aguirre matter, Murray found that the record did not support any disciplinary or performance-action against SEC Enforcement Director Linda Chatman Thomsen or Robert Hanson. Murray stated that Thomsen’s explanation for disclosing information to counsel for Morgan Stanley (which was doing due diligence on a potential CEO it wished to hire) was that “she was concerned about the impact on Morgan Stanley and the financial markets if Morgan Stanley hired someone as CEO who Enforcement believed engaged in insider trading, and, alternatively, that Morgan Stanley might not hire a qualified individual because Enforcement indicated somehow that he was in violation of the federal securities laws.”
Applying a preponderance of the evidence standard, Murray conducted a 12-point analysis in her decision, and concluded that the record did not support disciplinary action for Thomsen or Hanson. She noted that a decision on the IG’s recommendations of disciplinary action against Mark Kreitman had been postponed until a later date.